The Dangers of Value

December 4, 2010May 31, 2017

Any consumer loves a good sale; and make no mistake, I am a consumer. Moments ago, I purchased a bit of software at a steep discount– and while it can be fun to make a purchase, nothing beats the satisfaction that comes from knowing you’ve gotten a good deal. It’s why you open a new window and surf to RetailMeNot anytime you see a coupon code field. It’s why bargain hunters wake up at six a.m. to take advantage of a highly-anticipated Lightning Deal at Amazon. It’s why crazy people line up for hours before stores open on Black Friday. And it’s why thousands of PC gamers are actively refusing to purchase any content on Steam until the yearly holiday sale.

There’s no question that content creators can benefit from having a sale every now and then. My Steam friends list is littered with folks who purchased at least ten games they’ll never play, all because of Steam’s famous sales. I myself have bought several console games through Amazon that I would have otherwise rented, games that were discounted to such an extent that I couldn’t resist. That’s the power of a good sale: It can entice you into purchasing something you wouldn’t otherwise have purchased. It can bring $10, $20, $30 in revenue that the company wouldn’t have had without the sale. In some extreme cases, sales can even pull a company back from the brink of bankruptcy.

But I have to wonder about the potentially-negative effects that such sales can have on a company in the long term. Consider the term, value. Game reviewers and game enthusiasts alike have argued over the term’s definition, but common behavioral patterns make it clear: To a consumer, “value” describes the worth of an item as defined by its lowest known price. Here’s an example: Recently, a new racing game was released, called Need For Speed: Hot Pursuit. It’s an excellent game, even at its $60 asking price. On Black Friday, Amazon lowered the price to $35– and for a few short minutes, it was available in an Amazon Lightning Deal for $30. Not everyone who would have purchased the game at that price had the chance to do so, since it was a limited-time offer. But anyone who reads gaming news sites read about this and other deals, as they were reported on Joystiq, Kotaku, and the like. And having seen the game for $30, those consumers are now less likely to purchase the game for its full asking price of $60. As a result, while this sale may have brought in more revenue for the game’s publisher in the short term, in the long term, the value of this game has been decreased in the eyes of consumers.

True, not every consumer reads gaming news sites. Some folks will see a commercial for this game, and head to Amazon to buy it. But in the same way that today’s consumers now surf coupon code sites before making a purchase, tomorrow’s consumers will eventually check price-history sites such as CCC before completing their Amazon orders. Will you feel as comfortable buying a game for $60 after you’ve learned that it was $30 only a few weeks before?

Retailers and content creators alike need to understand that steep, widely-publicized discounts can have damaging effects on the value of a product. Rather than sell a recently-released game for 50% off or more, a content creator could, instead:

Sell the game at a lesser discount

Bundle the game with another product

Reward customers with promotional credits usable at your online store

In an age where so many talented developers are embracing their inner entrepreneur and selling their wares on their own online stores, it’s more important than ever for these developers to understand how to manage consumer expectations in regard to price. Consumers love rewards, and there’s no denying that sales can be a great tool, a mutually-beneficial opportunity that can boost a company’s revenue in a critical moment. Ultimately, though, boost is the correct term– and any developer that depends on these boosts for survival needs to re-evaluate the management of its products.